Dollar Rides 'Trump Trade' Toward Third Weekly Rise

The US Dollar has been on a strong upward trajectory in recent weeks, with the US Dollar Index (DXY) reaching a fresh two-month high. This surge in the Greenback's strength can be largely attributed to the rising odds of a Donald Trump victory in the upcoming US election, an event that markets are increasingly pricing in. The Trump trade, as it has been dubbed, is characterized by a stronger US Dollar, higher yields, and a more hawkish Federal Reserve.

Trump's trade policies, particularly his proposed tariffs, have been a significant factor driving the US Dollar's strength. His plans to impose substantial tariffs on imports, including a 60% tariff on Chinese imports, have raised concerns about global trade dynamics and the potential impact on the US economy. Most economists believe that such tariffs would be detrimental to the US economy, but the markets seem to be pricing in a Trump victory nonetheless.

The US Dollar's strength has significant implications for global trade and currency markets. A stronger US Dollar makes US exports more expensive, potentially hurting US companies' competitiveness abroad. Conversely, it makes imports cheaper, which could lead to increased consumer spending. The impact on global trade dynamics is likely to be complex and multifaceted, with winners and losers emerging across various sectors and regions.

Trump's proposed tariffs, if implemented, could have significant consequences for the US economy and global trade. The Wall Street Journal surveyed 44 economists in early October, asking them how Trump's proposed tariffs would affect domestic manufacturing employment. The results were mixed, with some economists predicting a modest increase in manufacturing jobs and others anticipating a significant decline.


The potential implications of a Trump presidency on US interest rates and Treasury yields are also a topic of interest. A Trump victory is seen as inflationary, which could lead to higher yields and a stronger US Dollar in the short term. However, the longer-term impact is less clear. Trump's policies on trade and the Federal Reserve could lead to increased uncertainty, which could in turn impact Treasury yields and the US Dollar's strength.

Market expectations for Fed rate cuts have also been influenced by the rise of Trump in the polls. The CME Fed rate expectation for the meeting on November 7 shows a 94.2% probability of a 25 basis point rate cut, while the remaining 5.8% is pricing in no rate cut. Chances for a 50 bps rate cut have been fully priced out. The Federal Reserve's monetary policy will likely be a key factor in determining the US Dollar's future trajectory, particularly in the event of a Trump victory.

Geopolitical risks and uncertainty have also played a significant role in the US Dollar's recent strength and its potential future trajectory. The upcoming US election, with its potential for significant policy changes, is just one example of the geopolitical risks that markets are grappling with. Other factors, such as Brexit and the ongoing trade tensions between the US and China, also contribute to the overall level of uncertainty and market volatility.


In conclusion, the US Dollar's recent strength can be largely attributed to the rising odds of a Trump victory in the upcoming US election. The Trump trade, characterized by a stronger US Dollar, higher yields, and a more hawkish Federal Reserve, has significant implications for global trade and currency markets. The potential impact of Trump's proposed tariffs on the US economy and global trade dynamics is a topic of ongoing debate, with mixed predictions from economists. The future trajectory of the US Dollar will likely be influenced by a range of factors, including the outcome of the US election, the Federal Reserve's monetary policy, and geopolitical risks and uncertainties.